Georgia may routinely depict Russia as an inveterate troublemaker, but, when it comes to selling the government’s shares in Tbilisi power company Telasi, the Georgian government appears happy to let one Kremlin-friendly Russian company take the lead. Government officials say that plans are now underway for an international offering of shares in Telasi, to be financed entirely by the company’s majority Russian shareholder, INTER RAO. Its slogans proclaiming “Energy Without Borders,” Russian energy company INTER RAO UES OCGJ (known as “INTER RAO” ) already holds a 75-percent stake in Telasi, a company traded on the Georgian Stock Exchange; the Georgian government holds a 24.53-percent stake, a holding whose international sale – whether in whole or in part -- the Ministry of Energy asserts would help increase Telasi’s transparency while bringing in cash to Georgian state coffers. Telasi employees own the remaining .47-percent stake in Telasi.
The Georgian government, though, does not have the money to finance the sale of its shares on its own, claimed Deputy Energy Minister Marika Valishvili – a statement slightly at odds with the Georgian government’s ambitious projects for ski resorts, tourism development and a program to convert the entire government to electric cars. The international public offering of Telasi shares is expected to take place by the end of 2011; the stock exchange has not yet been named.But INTER RAO’s involvement may go beyond financing an international public offering of Telasi shares. One source close to the plans, who asked not to be named, told EurasiaNet.org that the Georgian government is already discussing the sale of its shares to INTER RAO. Deputy Energy Minister Valishvili denied that such talks are taking place, but did not rule out the possibility that INTER RAO may want to increase its stake in Telasi. INTER RAO, whose largest shareholder is the Russian State Nuclear Energy Corporation, declined to discuss the project with EurasiaNet.org.
Ditrikh Muller, a financial market analyst with the Georgian Investment Group, assumes that INTER RAO, in fact, could have the strongest interest among any investors for buying Telasi’s stocks; under Georgian law, if one company alone acquires more than 75 percent of a firm, it has no obligation to call a shareholders’ meeting to decide questions facing the company.If INTER RAO increases its ownership to 95 percent of Telasi, it obtains the right to takeover any remaining stocks.
At the same time, he added, Telasi offers certain financial attractions. The company’s net profits for 2009 (2.237 million lari or $1.258 million) tumbled precipitously from its 2008 levels of 83.63 million lari (about $47.1 million) –the result of a “reevaluation of assets,” Telasi claims -- but total profits are increasing; in 2009, they climbed 4.5 percent to reach 119.7 million lari (roughly $67.4 million). Losses, once a sizable 38 percent of revenue, now stand at just over 14 percent, according to the company’s financial statements. Escaping closer scrutiny of any purchase decision may be one reason for the decision to offer the Telasi shares for sale on an as-yet-to-be-named international stock exchange, rather than on the Georgian Stock Exchange (GSE), postulated Levan Surguladze, head of the investment bank Caucasus Financial Service. The GSE handles only a few trades per day.
GSE Supervisory Board Chairman Giorgi Loladze, however, asserted that local interest in Telasi could be strong since the company is now posting a profit. He recommended that the government retain at least a 5-percent stake in Telasi to be able to call for audits or meetings and have the right to access information about planned deals and contracts. INTER RAO’s plans to purchase Telasi shares are unknown, but Georgian energy analyst Liana Jeravlidze argues that INTER RAO increasing its stake in Telasi would fit into its pattern of acquiring strategic interests in other Caucasus energy systems; the company runs Armenia’s aging Metsamor nuclear power station, and also controls Armenia’s national power company, Electric Networks of Armenia, as well as several Armenian hydropower stations. It is lending a hand (via the Abkhaz company Chernomorenergo or Black Sea Energy) in the partial upgrade of the Enguri hydropower station; 60 percent of Enguri’s annual 4.5 billion kilowatts of electricity per hour goes to Georgia. If INTER RAO expands its presence also in Telasi, “INTER RAO will be the biggest player in the region,” Jeravlidze said. “They want to become a monopolist, to control the region through [its energy] infrastructure.” Higher tariffs might also be in store with such a move, Jeravlidze continued. INTER RAO earlier tried and failed to link any change with electricity tariffs with an increase in inflation , she noted. “If it gains full control of the company, it can follow through on its earlier attempt and increase tariffs based on changes in inflation,” Jervalidze argued. Inflation in Georgia for 2010 was 11.2 percent.
Neither Muller nor Jervalidze, though, rule out interest in Telasi from other international investors if INTER RAO conducts an aggressive PR campaign that targets “serious” investment houses and financial publications.
The amount of stock put up for sale, though, will show whether the plan is actually to diversify Telasi’s ownership, Muller added. The immediate sale of a sizeable chunk of stocks – 5 percent or higher of the company – followed by similarly sized sales will only drive share value down and decrease investor interest, he noted.
Nino Patsuria is a freelance business reporter based in Tbilisi.
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